Question

The City of Bernard starts the year of 2017 with the following unrestricted amounts in its general fund: cash of $27,750 and investments of $83,750. In addition, it holds a small building bought on January 1, 2016, for general government purposes for $304,000 and related long-term debt of $243,200. The building is being depreciated on the straight-line method over 10 years. The interest rate is 10 percent. The general fund has four separate functions: general government, public safety, public works, and health and sanitation. Other information includes the following:

Receipts:
Property taxes	$552,000
Sales taxes	100,400
Dividend income	28,000
Charges for general government services	22,600
Charges for public safety services	10,600
Charges for public works	4,500
Charges for health and sanitation services	32,700
Charges for landfill	9,800
Grant to be used for salaries for health workers (no eligibility requirements)	27,800
Issued long-term note payable	215,000
Sold above investments	101,000
Receivables at year-end:
Property taxes ($11,600 is expected to be uncollectible)	160,500
Payments:
Salary:
General government	99,500
Public safety	98,750
Public works	91,250
Health and sanitation (all from grant)	23,600
Utilities:
General government	9,200
Public safety	20,550
Public works	17,850
Health and sanitation	5,700
Insurance:
General government	28,500
Public safety	14,400
Public works (all prepaid as of the end of the year)	6,900
Health and sanitation	6,000
Miscellaneous:
General government	20,800
Public safety	14,700
Public works	9,650
Health and sanitation	7,800
Interest on previous debt	24,320
Principal payment on previous debt	16,600
Interest on new debt	19,350
Building (public works)	222,000
Equipment (public safety)	93,000
Public works supplies (30% still held)	27,300
Investments	118,000
Ordered but not received:
Equipment	42,000
Supplies	11,100
Due at end of year:
Salaries:
General government	21,100
Public safety	19,550
Public works	7,500

On the last day of the year, the city borrowed $74,000 from a local bank and used that money to buy a truck. The first payment on the loan (plus interest) will be made at the end of the next year.

The city started a landfill this year that it is recording within its general fund. It is included as a public works function. Closure costs today would be $289,500 although the landfill is not expected to be filled for nine more years. The city has incurred no costs to date although the landfill is now 15 percent filled.

For the equipment and supplies that have been ordered but not yet received, the City Council (the highest decision-making body in the government) has voted to honor the commitment when the items are received.

The new building is being depreciated over 20 years using the straight-line method and no salvage value, whereas depreciation of the equipment is similar except that its life is only 10 years. Assume the city records a full year’s depreciation in the year of acquisition.

The investments are valued at $126,500 at year-end.

1. a-1. Prepare a statement of activities for governmental activities for December 31, 2017, and the year then ended.

2. a-2. Prepare a statement of net position for governmental activities for December 31, 2017, and the year then ended.

3. b-1. Prepare a statement of revenues, expenditures, and other changes in fund balances for the General Fund as of December 31, 2017, and the year then ended. Assume that the purchases method is being applied.

4. b-2. Prepare a balance sheet for the General Fund as of December 31, 2017, and the year then ended. Assume that the purchases method is being applied.

Answer 1

• City of Bernard Year 2017
  General Fund:
  Cash			27750
  Investments			-83750
  Building at cost 2016			304000
  Bought on 01/01/2016
  Related Long term debt			-243200
  Life of building in years			10
  Depreciation straight line
  Interest rate (%)			10	248000
  Statement of activities and a statement of net position as at December 31 2017
  Activities			$
  Receipts:
  Property taxes			552000
  Sales taxes			100400
  Dividend income			28000
  Charges for general govt services			22600
  Charges for public safety services			10600
  Charges for public works			4500
  Charges for health and sanitation services			32700
  Charges for landfill			9800
  Grant to be used for salaries of public
  health workers (no eligibility requirements)			-27800
  Issued long term note payable			215000
  Sold above investments			101000
  Property (11600 expected uncollectible)			160500	Uncollectible		11600
  Total receipts			1209300
  Payments:
  Salary
  General government			99500
  Public safety			98750
  Public works			91250
  Health and sanitation (all from grant)			-23600
  Utilities:
  General government			9200
  Public safety			20550
  Public works			17850
  Health and sanitation			5700
  Insurance:
  General government			28500
  Public safety			14400
  Public works (all prepaid at end of year)			-6900	Prepaid	-6900
  Health and sanitation			6000
  Miscellaneous:
  General government			20800
  Public safety			14700
  Public works			9650
  Health and sanitation			7800
  Interest on previous debt			24320
  Principal payment on previous debt			16600
  Interest on new debt			19350
  Building (public works)			222000	New
  Equipment (public safety)			93000	New
  Public works supplies (30% still held)			27300	Closing stock		8190
  Investments			118000	New
  Oedered but not received
  Equipment			-42000		To be paid for when received
  Supplies			-11100		To be paid for when received
  Due at end of year:
  Salaries
  General government			-21100		Outstanding
  Public safety			-19550		Outstanding
  Public works			-7500		Outstanding
  Total payments			833470
  Opening cash balance			27750
  Total receipts			1209300
  less total payments			-833470
  Closing cash balance			403580
  b.
  Statement of revenues, expenditures and other changes in General Fund balances as of Dec 31, 2017 (assuming purchsases method)
  Revenues:
  Property taxes			552000
  Sales taxes			100400
  Dividend income			28000
  Charges for general govt services			22600
  Charges for public safety services			10600
  Charges for public works			4500
  Charges for health and sanitation services			32700
  Charges for landfill			9800
  Sale of investments			101000
  Property (less uncollectible 11600)			148900
  Total revenues			1010500
  Expenditures:
  Salary
  General government			99500
  Public safety			98750
  Public works			91250
  Health and sanitation (all from grant)			-23600
  Utilities:
  General government			9200
  Public safety			20550
  Public works			17850
  Health and sanitation			5700
  Insurance:
  General government			28500
  Public safety			14400
  Public works (all prepaid at end of year)			-6900
  Health and sanitation			6000
  Miscellaneous:
  General government			20800
  Public safety			14700
  Public works			9650
  Health and sanitation			7800
  Interest on previous debt			24320
  Principal payment on previous debt			16600
  Interest on new debt			19350
  Depreciation:
  New building (20 years str line)			11100
  New Equipment (10 years str line)			9300
  Total expenditures			474420
  Net revenues			536080
  Balance Sheet of General Fund as of 31 December, 2017
  Assets:
  Cash			403580
  Investments			126500
  Building (old)			273600
  Building (New)			210900
  Equipment (New)			83700
  Landfill (15%)		289500	43425
  Liabilities:
  Long term debt (building)			243200
  General Fund